September was about as boring and sideways a representation of the stock market as one could find. If it were not for the fact that we “could’ve” had a possible move up in interest rates, it would have been completely lackluster. The fact that the Federal Reserve didn’t raise interest rates is very telling about what they “really” think about our economy. While the labor numbers are better, I am certain that we will be getting confirmation of a U.S. manufacturing slow down soon enough. From my perspective, there is still a giant disconnect between Wall Street and Main Street.
Most people have spent September listening to our shining examples in American politics and paying less attention to investments. The sideways movement of stocks in September was not something new. Most September and Octobers on Wall Street are generally sideways to very negative. The election isn’t helping with how much the market hates uncertainty and add to that any of Putin’s threats, and the future seems opaque. Bond yields have generally increased on rumors of a certain December rate hike and have provided market tumult in early October.
Our stance is that we are taking the rest of this month to finish most of our tax loss selling to offset capital gains, and reposition for what we think will be a better Q4 and a bumpy 2017. Our 2017 outlook means that our investment in equities must be solid citizens, have strong balance sheets and pay dividends. Additionally, we think it “is” time to make and keep a more healthy allocation to intermediate term bonds. The bonds must be of the highest quality and either tax free or AAA corporate credits. Additionally, we would like our clients to have approximately 15% cash going into the New Year. This will allow us to take advantage of the Fed’s propensity to manipulate our markets.
Finally, now is a good time to review your time horizon goals. Just remember, if you are going to retire in more than 5 years, but less than 10 years, we would still have you maintain 60-65% U.S. and International stocks. There really isn’t any other place for investors to go to have the chance of exceeding a 6% taxable return; therefore, like water, we think your money will still continue to follow the path of least resistance in the near term. Longer term, our review process will pinpoint exactly where we think your capital should be.
Enjoy the Autumn!